I'm managing director of Strategic Communications for FTI Consulting, based in Houston. Prior to joining FTI in 2012, I had a 33 year career in the oil and gas industry, working public policy issues for a number of companies including Shell, Burlington Resources, El Paso Corp., and Coastal States. I've also led numerous industry-wide efforts to address regulatory and legislative issues at the local, state and federal level. From April 2010 through June 2012, David served as the Texas State Lead for America’s Natural Gas Alliance. I attended Texas A&I University and The University of Texas, earning B.A. in accounting.

The Texas Shale Oil & Gas Revolution - Leading the Way to Enhanced Energy Security

Last week, we talked about the Eagle Ford Shale, and what a blessing it is for Texas and Texans. In this piece, we will expand that discussion to talk about how the massive production coming out of the Eagle Ford and other oil and gas shale plays in Texas are affecting the national and international supply and demand picture.

Texas is the energy capital of the world, and Houston is its home base.

There are more energy-related jobs in Houston than in any other city on earth. Upwards of 200,000 in the business itself (E&P, Midstream, Refining) – this does not include the thousands of oilfield service industry jobs at companies like Halliburton, Baker Hughes and Schlumberger. All of the major oil and gas companies have thousands of employees in the city, and many of the larger independent producers are headquartered here. When you factor in all the indirect and induced jobs that the industry supports in all the hotels, cafes, gas stations and clothing stores around the state, you quickly get numbers into the millions.

Some more statistics:

Texas today produces roughly 30% of US natural gas and roughly 30% of US oil production.

If Texas were a stand-alone country, it would today rank as the 14th largest oil producing nation and 3rd largest natural gas producing nation on the face of the earth.

Where natural gas is concerned, only Russia and the other 49 states would rank ahead of Texas.

With the advent of the Eagle Ford Shale in 2008, shale natural gas production almost tripled in Texas between 2009 and 2012.

Shale oil production also ramped up very rapidly in those years, with the Eagle Ford Shale and various shale plays in the Permian Basin, like the Wolfcamp/Wolfberry, coming on line.

As mentioned last week, several projections indicate that the Eagle Ford Shale is very likely to ultimately surpass the East Texas Field as the largest oil field ever discovered in the lower 48 states.

Of course, we are now seeing speculation that the Cline Shale formation in West Texas may well contain more oil than the Eagle Ford, so that distinction could be short-lived.

We explored the implications of all of this for Texas last week. For the nation, the implications of the shale revolution are equally huge. The International Energy Agency last November issued a report that projects the U.S. will surpass Saudi Arabia in total oil production by 2020. And that report was issued before anyone had a clue about the potential of the Cline Shale.

Many people scoffed when first Citigroup and then the US Energy Information Administration issued reports last year projecting that the US could become completely independent of imports from outside of North America by 2020. Today, few informed people scoff at that prospect.

Last month, the US only imported 37% of its oil consumption. That’s down from 50% late last year and almost 70% just four years ago.

Think of the national security implications of the United States becoming free of the need to import oil from countries like Iraq, Saudi Arabia, Kuwait and Venezuela. Think of what it will mean to this country the day that we no longer have to worry about Iran’s constant threats to close the Straits of Hormuz. This where shale oil and gas is leading us.

And it’s not just the oil from shale that is enhancing our energy security – the abundance of shale natural gas will also play a role as compressed and liquefied natural gas becomes an increasingly viable and cost effective option for large trucks and ultimately passenger cars. If you don’t think there is enough natural gas to accommodate rising demand in the transportation, manufacturing and power sectors, consider this: Today, there are fewer than 400 rigs in the US drilling for natural gas. Four years ago, there were over 1600 rigs engaged in that endeavor. Yet, as the natural gas rig count has dropped by 75%, overall natural gas supplies have continued to rise.

Why? Because operators are getting better over time at maximizing recoveries from each well, and because these oil shales – the Eagle Ford, the Bakken, and those in the Permian Basin – contain a high volume of associated natural gas. So whether companies are drilling for natural gas or not, they continue to find it.

Meanwhile, in dry gas plays like the Haynesville, Barnett and the dry gas portion of the Eagle Ford, companies are basically drilling only the wells they are required to drill under their lease agreements. What this all means is that there is an incredible amount of excess drilling capacity in the system, waiting to come on line should the natural gas price firm up for any prolonged period of time.

Here is the main thing to remember about the US oil and gas shale revolution: We are today at the tip of a very large iceberg.

Most of the known shale plays today have been discovered in just the last 6 to 7 years.

Prior to 2006, the Barnett Shale in North Texas was the only significant shale play being developed in the US.

More new shale plays are being discovered on almost a monthly basis – we are far from having discovered them all.

Most resource base projections are based on the oil and gas that is recoverable with current technology. In the oil and gas industry, technology advances every day, so such projections tend to become understated almost as soon as they are released.

Consider this: the common belief that an operator is able to recover 10-15% of the available resource with the initial completion of an Eagle Ford Shale well. As technology improves, it is likely that companies will be able to go back into many of these wells, re-stimulate them, and recover much more of that resource decades from now.

Last week, New York Times columnist David Brooks wrote this: “Most important of all, the boring old oil and gas engineers have transformed the global balance of power.”

That’s where the US shale oil and natural gas revolution is leading us, and Texas is leading the way.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.